Skyscanner Malaysia Travel Blog & Deals

The science behind flight pricing

It’s a familiar story: you’ve found a good deal for a flight ticket to your dream holiday destination, but don’t want to commit to buying it just yet. Three days later, you finally make up your mind, so you whip out your credit card – but the stuff of nightmares came true; the deal has vanished and the flight has gone from being a steal to being out of your budget, leaving you wracked with guilt.

Read on to avoid this horrible fate and arm yourself with some of the basic whys and hows of flight price changes. We spoke to Alex Astafiev, the Principal Product Manager here at Skyscanner, to understand what really goes on behind the scenes so you’ll have the low-down on how to snag great flight deals for your well-deserved holidays.

Why do flight prices go up and down?

When you’re booking your next flight, it’s important to know that prices fluctuate. These price changes reflect how airlines react to sales and external factors, with the aim of filling up their planes. Contrary to popular belief, and very much similar to stock prices, flight prices are affected by sales numbers rather than search volumes. So no matter how many times you hit the refresh button on a particular route, know that you’re not driving up the price by doing so.

Am I getting a good deal?

The only way to know if you’re getting a good flight deal is knowing the average price for that particular route, for that particular season or month. Get familiar with the usual prices before you commit. When you spot a price that is much lower than usual, act fast and grab the ticket. If prices seem higher than usual, you can wait a while before making your purchase. Monitor the fares for price drops – but don’t wait until the very last minute. Need help? We’ve made this task easier for you through our Price Alerts feature. Just set one up and we’ll keep an eye on the prices for you.

Airlines decide on a price range based on how much customers are willing to pay for the tickets. Decide on a price range that you’re comfortable with because it’s important to know what you’re willing to fork out. If a particular ticket is out of your reach, think flexibly and check out alternative dates and routes to find a price which suits you.

Before you book, be aware of the following:

Prices are always on the move. They go up and down frequently.

The day of the week you buy your ticket may affect the price you pay. A day with a high number of bookings can drive the prices up, but do note that there are many algorithms and permutations that go into pricing. Apart from sales, it could be the plane model, the number of seats, the demand for that route, etc.

The closer you get to the departure date, the more likely that ticket fares will increase. This might not always be the case, but airlines usually protect some seats for ‘late availability’ bookings as part of their pricing strategy. These seats cater to last-minute travellers who need to be at a certain place at a certain time and will pay a premium to do so.

Airlines do not have the capability of using cookies to shift their prices for specific customers. Contrary to popular belief, going incognito on your search won’t help you save a cent!

How do airlines control ticket prices?

Airlines have two goals. Firstly, they want to fill the plane. Secondly, they want to fill it profitably. In order to achieve these goals, airlines have to manage their ticket prices through a process known as yield management.

Airlines allocate different ‘buckets’, or ticket price levels on every flight. That RM200 return flights to Bangkok offered by an airline does exist, but there are probably only a few seats available at that price; once seats at that price level sell out, tickets will be moved to the next pricing level.

With airlines unable to fly smaller planes if only half their seats are booked, they need to make sure they’re able to fill it. Airlines know which seats sell best at particular times of year (e.g. school holidays) and they are fully aware of the more challenging periods to sell tickets (e.g. rainy season in Bali). Based on their data, they adjust their buckets, or price levels, accordingly. Think fewer bargains during popular flying periods and more bargains during quiet travel periods. This is good ol’ supply and demand at work.

You should also note that these initial bucket allocations can change depending on whether tickets are sold at the level the airline initially predicted based on their historical data. Therefore, if an airline thought a flight to Japan in March would sell well, but is actually selling poorly, the airline may increase the allocation of tickets in a lower priced bucket, meaning more value-for-money tickets for travellers!

The 3 golden rules of yield management you need to know

Pricing Strategy: Airlines base their prices on the needs of their customers. A tourist can afford to plan his holiday and book months ahead to secure a great deal, but a business traveller is likely to book tickets close to the departure and pay full fare.

Availability Control: Airlines control the availability of certain seats based on their historical data. This is how the airline determines how many tickets will be available at rock bottom prices.

Control of Inventory: Airlines control the seats and the allocations of seats offered at specific fares at any given time. This process is known as control of inventory, and this is how airlines attempt to maximise profits on every flight that they operate.

Why do prices differ between airlines and online travel agents?

OTAs negotiate private fares with airlines. They make agreements where they commit to bringing in a certain volume of sale at the private fare.

OTAs may undercut the airline price by a certain amount – sometimes as little as $1 – in order to attract customers and have the chance to offer them their choice of hotels, car rentals, or other services.

OTAs may commit to the price they show their potential customers – even if the actual price has changed in the background, and even while other platforms have already displayed an updated price.

Tip: Travellers should always compare flight prices after adding up additional costs that come along with check-in baggage and other flight peripherals, rather than just the base fare alone.

When is the best time to book?

With more automation and less human interference in yield management, recent studies show that it now makes very little difference which day you buy your ticket. In fact, prices vary by around 1% only across the week.

However, the duration of time between the flight booking and the departure dates do make a difference for flight prices. In general, the best time to book long-haul flights would be four to six months before departure.

How can you get the best flight prices? And how can Skyscanner help you do just that?

Thankfully for you, we love getting into the nitty-gritty of flight pricing and have built some tools to help you make sense of it. Do know that airlines optimise their airline pricing strategy and algorithms all the time. Aside from banking on experience or trial and error, there are certain best practices you can adopt.

1. Know what price is right for you

If you know what the average price is, you’re already one step ahead. Decide on the range you’re comfortable with, and then wait for the prices to go down. Take note that during the high season and public holidays, the average price for the route will be at the higher end of the spectrum.

To make things easier for you, we’ve built price charts and this handy traffic light system (red, orange or green) to tell you if what you’re seeing is a good price.

If you like to go old-school, we’ve also rounded up the top routes from Kuala Lumpur for you to view the average prices at a glance. You can also click on the links below to see the price trend.

Average domestic flight prices in 2018

2. Keep an eye on the price – or use Skyscanner Price Alerts

Once you know the average flight price for your desired route, you can sit and wait until the price falls within your budget range. Be sure to set up a price alert for your trip so you’ll be notified when the price drops.

3. Keep it flexible

Flexibility comes in many forms. It could be the arrival or departure time, accepting more layovers, travelling on non-peak dates, or even going to a different place. We’ve rounded up our best travel tools to do just that: Cheapest Month Search, Everywhere Search, and Multi-City Search.

4. Know what your time is worth

Alex shares that he doesn’t obsess too much about flight prices; he will make his bookings when he spots it at the lower end of his ideal price range.

After all, do you really want to camp in front of your computer for hours on end, waiting for a cheap flight to drop on your laptop? Saving a few dollars isn’t worth the pain of monitoring flight prices closely.

That’s why you should use our price alert feature! At Skyscanner, we’ve spent hours building our tools and optimising them for you. This way, you never have to agonise over the changes in flight prices again.